How did MRK's Q1 2024 EPS surprise impact investor confidence?

Merck & Company, Inc. (MRK) reported an EPS surprise of $0.14 for Q1 2024, which had a positive impact on investor confidence as evidenced by the following: 1. **Analyst Optimism**: Following the earnings release, analysts maintained a positive outlook on Merck. The consensus rating remained a "Strong Buy" with 20 analysts rating it as such and two rating it as "Holds". This indicates that analysts believe the stock has potential for further price appreciation. 2. **Price Target Increases**: Truist Securities analyst Robyn Karnauskas increased the price target for Merck from $142 to $143, suggesting an upside potential of 9.1% from the current price. The mean price target of $138.14 represents a premium of 5.4% over the stock's current price, indicating that analysts believe the stock is undervalued. 3. **Stock Performance**: Despite underperforming the broader market over the past year, Merck's stock surged in early 2024, gaining 20.3% year-to-date, outpacing the S&P 500's 11.3% gains. This recent performance reflects investor confidence in the company's future prospects beyond Keytruda's exclusivity loss and the positive impact of its acquisitions. 4. **Earnings Estimate Revisions**: The Zacks Consensus Estimate for Merck's current fiscal year has changed positively, with an increase of 6.6% over the last 30 days. This suggests that analysts are revising their estimates upwards, which can lead to increased investor confidence as it indicates a potential for higher earnings in the future. 5. **Acquisitions and Strategic Moves**: Merck's acquisition of Harpoon Therapeutics is expected to close in the first half of 2024 and is likely to result in a non-tax deductible charge of approximately $650 million of R&D expense. This strategic move is seen as a positive sign by investors, indicating the company's commitment to innovation and growth. In conclusion, Merck's Q1 2024 EPS surprise has likely contributed to increased investor confidence, as reflected in the positive analyst ratings, price target increases, and the company's strong earnings estimate revisions. Additionally, the company's strategic acquisitions and focus on innovation are likely bolstering this confidence.